The Wall Street Journal reports that in the wake of MF Global Holdings Ltd. filing for bankruptcy protection, about 33,000 of the securities firm’s clients are finding that they can’t access their cash until trustee James Giddens gives them permission. Giddens is the trustee overseeing the liquidation of MF Global Holdings’ broker-dealer unit, MF Global Inc.
Giddens had asked court permission to move about 60% of the $869 million that has been frozen-that’s about $520 million. He is hoping that if the court says, then the distributions would soon follow. However, a spokesman for Giddens has warned that because of MF Global’s financial woes, customers might not be able to get all of their money back.
MF Global Holdings sought Chapter 11 protection last month after a number of credit downgrades and a steep drop in its stock price. Some $600 million also appears to have gone missing. While this bankruptcy is not considered as big a debacle as that of Lehman Brothers Holdings, for traders, investors, and brokers that sold and bought derivatives via MF Global, the repercussions have been devastating.
The MF Global clients whose accounts have been frozen are now unable to make trades or pay for their bills. While Giddens has approved the transfer of accounts that were involved in active trades on the day that MF Global filed for bankruptcy, he froze accounts that only had cash.
Meantime, criminal investigators and federal regulator are still trying to find out what happened to the missing $600 million in customer money. The CFTC is spearheading the search for the AWOL funds, while the SEC is concentrating on a separate MF Global unit. Even the Federal Bureau of Investigation is involved.
According to the New York Times, in all the craziness leading up to bankruptcy filing, MF Global did not register all transactions in its books. It is now up to regulators to figure this out, one dollar at a time. Questions have been raised as to whether MF Global mixed client monies with its own funds, which would have been improper.
Even though MF Global received an extension to access $8M that JPMorgan Chase & Co. held through November 30, discussions to keep MF Global running while in bankruptcy have stopped, at least for now. MF Global’s bankruptcy among the largest the country has seen.
MF Global had issued huge bets on European sovereign debt and may have been doctoring its records before submitting its quarterly reports. Do not hesitate to contact our stockbroker fraud law firm if you invested in MF Global 6.25% Senior Notes due 2016, which dropped in value after the bankruptcy.
With MF Global Money Still Missing, Suspicions Grow, Dealbook, November 16, 2011
Purgatory for MF Global Customers, The Wall Street Journal, November 16, 2011
More Blog Posts:
MF Global Holdings Ltd. Files for Bankruptcy While Its Broker Faces Liquidation and Securities Lawsuit by SIPC, Institutional Investor Securities Blog, October 31, 2011
Ex-Lehman Brothers Holdings Chief Executive Defends Request that Insurance Fund Pay Legal Bills, Stockbroker Fraud Blog, October 19, 2011
UBS to Pay $2.2M to CNA Financial Head for Lehman Brothers Structured Product Losses, Stockbroker Fraud Blog, January 4, 2011